Primary & Secondary Education
School District (Serial) Bonds, 2011
Expected Sale Date
NEW YORK, Aug 17, 2011 -- Moody's Investors Service has assigned an initial Ba1 underlying rating and A2
with a stable outlook to Wyandanch Union Free School District's (NY) $2 million
School District (Serial) Bonds, 2011. The bonds are secured by the district's
unlimited ad valorem property tax pledge and will redeem $761,000 Bond
Anticipation Notes and finance various capital improvement projects.
SUMMARY RATINGS RATIONALE
The Ba1 rating reflects the district's narrow reserve levels and
limited liquidity position, limited tax base characterized by weak
demographics, and a manageable debt position.
The A2 enhanced rating with a stable outlook is based upon the
additional security provisions offered by New York State's Section 99-B
school intercept program, which authorizes the state to withhold
future allotments of state aid in order to make bond payments in the event
of default by the school district. While the program does not ensure avoidance
of a pending default or guarantee immediate repayment, Moody's believes it does
enhance the potential for recovery upon default and that the cure period is
likely to be short. The Ba1 rating reflects the district's pressured financial
operations, modest tax base with below average wealth levels and manageable debt
Effective January 1, 2012, all local governments in New York State will be
subject to a property tax cap which limits levy increases to 2% or the rate of
inflation, whichever is lower. While school district debt has been exempted from
the cap, debt has not been exempted for all other local governments.
Moody's will continue to treat all general obligation debt issued in New York as
an unlimited tax pledge through the end of the year. We continue to research
what the impact of the new property tax cap will be on debt issued by nonschool
districts after it goes into effect next year. For more information regarding
the property tax cap please reference the Special Comment "New York State's
Property Tax Cap will Further Pressure Local Government Finances; School
District's Most Impacted" released July 5, 2011.
-Reversal of deficit fund balance
-Modest tax base with depressed socioeconomic wealth indicators
-Exposure to declining state aid
-Narrow liquidity position
DETAILED CREDIT DISCUSSION
FINANCIAL POSITION PRESSURED DRIVEN BY NARROW RESERVES AND LIQUIDITY POSITION
Wyandanch Union Free School District's financial position is expected to remain
challenged in the near term given limited cash position and narrow fund balance.
The district ended two of the last four fiscal yearswith negative fund balance
levels. In fiscal 2008, operations ended with a $2.6 million operating deficit,
fully depleting $213,000 in reserves and generating a negative $2.5 million fund
balance. The deficit was mainly driven by $2.5 million reduction in state aid.
The district was notified of the impending shortfall, but did not make the
comparable cuts in expenditures to preserve programs. Favorably, fiscal 2009
ended with a $1.1 operating surplus primarily due to one-time special state aid
($1.4 million). The fund balance deficit was reduced to a still challenged
negative $1.76 million (-5.5% of revenues). Fiscal 2010 ended with an $805, 000
operating surplus due to conservative budgeting and implementation of cost
controls. In addition, there was a $1.4 million prior adjustment of a portion of
compensated absences, reclassified as long term liabilities (eligible
retirees that are still employed and will not retiree within the year).
At recent fiscal 2011 (unaudited) close, management is projecting a $440, 000
operating surplus, increasing fund balance to a total of $1.1 million (2% of
revenues). The surplus is driven by continued monitoring of expenditures and
reductions in discretionary spending. Year-to-date, officials are not expecting
to issue RANs due to slightly improved cash position. The budget was reduced by
3% and the tax levy increased by 4% to offset expenditure pressures and
reduction in state aid ($1.7 million). The district will be challenged to end
structurally balanced and given narrow reserves, strong dependency on state aid
in an environment of cuts to local government. Future rating considerations will
strongly include the district's ability to produced structurally balanced
operations and augment reserves in line with budgetary growth.
RESIDENTIAL TAX BASE WITH BELOW AVERAGE WEALTH LEVELS
Growth within the district's tax base is expected to remain stable to slow over
the intermediate term, given limited economic development and as a result of the
national and regional softening of real estate markets and the continuation of a
challenging economic outlook. The total assessed value for the district has
declined at an average annual rate of -1.1% over the last five years.
Further, full valuation has decreased at an average rate of 1.2% over the same
time frame. Full value per capita is a moderate at $76,352, and wealth levels
are well below state and national medians.
DEBT BURDEN EXPECTED TO REMAIN MANAGEABLE
Moody's expects the district's direct debt burden (1.2% of full value) to remain
manageable, given above average amortization of principal (100% in ten years)
and limited additional borrowing plans. The district's debt plans may include
approximately $24.5 - $50 million over five years for various capital
improvement projects. The district has no a variable rate debt obligation
or derivative agreements.
What could make the rating change - UP
- Structurally balanced financial operations and increased financial reserves
in-line with budgetary growth
- Tax base growth and demographic profile at levels
- Reduction in cash flow borrowing
What could make the rating change - DOWN
- Protracted structural budget imbalance
- Depletion of General Fund balance
- Deterioration of the district's tax base and demographic profile
2000 Population: 10,725
2010 Full valuation: $893 million
Full value per capita: $76,352
Direct Debt Burden: 1.2%
Overall Debt Burden (after state school building aid): 2.6% (2.0%)
Payout of Principal (10 years): 100%
Fiscal 2010 General Fund Balance: $ 659,000 (1.2% of General Fund revenues)
Fiscal10 Unreserved Undesignated Fund Balance: $256,000 (0.5% of General Fund
1999 Per Capita Income (as % of State and U.S.): $13,301 (156.9% and 61.6%)
1999 Median Family Income (as % of State and U.S.): $43,229 (83.6% and 86.4%)
Post-sale parity debt outstanding: $10.8 million
The principal methodology used in this rating was General Obligation
Bonds Issued by U.S. Local Governments published in October 2009. Please see the
Credit Policy page on www.moodys.com for a copy of this methodology .
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Public Finance Group
Moody's Investors Service
Public Finance Group
Moody's Investors Service
Senior Credit Officer
Public Finance Group
Moody's Investors Service
Journalists: (212) 553-0376
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MOODY'S ASSIGNS INITIAL Ba1 UNDERLYING RATING AND ENHANCED A2 RATING WITH A STABLE OUTLOOK TO WYANDANCH UNION FREE SCHOOL DISTRICT'S (NY) $2M GENERAL OBLIGATION BONDS, SERIES 2011
Moody's Investors Service, Inc.
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